Monday, July 6, 2015

1: Community solar gardens (CSG’s) have the potential to help the
low-income save about 5% on their utility bills which is why it is competitive.
The St. Paul Public Housing Agency is becoming an anchor for CSG projects
because of the economic justice community solar provides.You
can read more on that amazing story with this addendum.

6: I personally sat
through all 7 hours at the PUC hearing on community solar on June 23rdso that I could share first-hand observations andI can attest that not all CSG developers have the same position on the
co-location issue.What the PUC agreed to was a partial settlement reached between Xcel and several
community solar developers that not all developers proposing projects in MN
agreed with.Read this addendum to find out how their opinions differed.

7:
Xcel could make a valid point that they are friends of the Community Solar
program who just do not want to see it turn into a way for big corporations to
profit at the expense of smaller customers in actual communities. Xcel is probably
recasting their actions as being supportive of CSG developers who are actually
doing community scale solar as opposed to sneaking in utility-scale solar under
the community solar banner. However Xcel hit Community Solar
developers with another cloud of uncertainty by being so slow to offer
developers the information they needed about the capabilities of the
distribution grid. Read this addendum about Xcel’s lack of transparency.

It
would be a fair assessment to say Xcel does not want community solar
developments to attain the scale advantages of utility-scale solar while at the
same time getting the more favorable financing terms that come with being
classified by regulators as a smaller scale community solar installment. The
big talking points that Xcel’s lawyer repeated at the PUC on 6-23 is that co-locating
lots of megawatts is “utility scale” solar rather than
the community scale solar the state legislature intended and that any
utility-scale solar projects should be subject to a competitive bidding
process.

Now
let’s have a little fun with some of the logical contradictions:

1:
Something interesting that I observed first hand is that different people have
different definitions of what qualifies as utility scale solar depending on
whose interests they serve. At the June 23rdhearing, I heard one solar developer
say that anything under 10 MW is distributed generation and anything above 10
MW is therefore utility scale. Then I heard Ben Gerber from the Minnesota Chamber
of Commerce who supported Xcel’s 1 MW cap say to the PUC that anything more
than 1 MW is utility scale solar. Well which is it?

2: This
would not be the first time, the Chambers of Commerce spokespeople have offered
double standards. When I attended Xcel’s rate increase hearing last year, Todd
Klingel from the Minneapolis Regional Chamber of Commerce was the only speaker
aside from Xcel who actually supported Xcel’s nearly 10.4% multi-year rate
increase proposal, saying that too many people take energy for granted. But
when it came to Community solar on Tuesday, Ben Gerber from the Minnesota Chamber
of Commerce said even a 1% rate hike from Community Solar can be a huge
increase and burden for the large users they represent.

3:
Ben Gerber from the Chamber said such increases from community solar are
unnecessary because Xcel could do solar for half the cost. Xcel says they are
separately developing large “utility scale” solar projects at lower cost than
solar gardens; 7¢ per KWH versus 14¢ per KWH Xcel says they can develop
utility-scale projects for about half the
price because they have to pay roughly twice as much for power
generated by community solar gardens as compared with typical competitively-bid
utility-scale projects. Should we just leave it up to Xcel to do most of
the solar if they can do it for cheaper?

Nevertheless,
Xcel’s position was that the 1 MW aggregate limit has to be there in order to
stop these supposed cost shifts. And then they asked the PUC to adhere to their
role in protecting the public interest and “ratepayer” interest.

To paint a
more accurate picture, here are the estimations I heard during the 6-23
hearing. If the 912 MW in co-located CSG applications were capped at a 1 MW
limit, they project 100-200 MW to be built and a .5% estimated residential rate
increase. With a 5 MW size limit, they project 500-600 MW of total MN projects and
a 2% estimated residential rate increase. If the size limit was 10 MW they
project 800 MW to be built with a 2.8% estimated residential rate increase.

Xcel filed with the PUC against co-located Community Solar Garden's above 1 MW. Is Xcel’s
real motivation to slow the Community Solar Garden program down so that it does
not infringe upon their market share?

Co-locating CSG’s gives the
overall CSG projects the same shared infrastructure benefits, cost efficiencies
and economies of scale aspects that Xcel frequently uses to justify their
preference of utility scale solar over residential. The PUC order actually
recognized the benefit of co-locating CSG projects. It specifically states:
“multiple community solar garden sites may be situated in close proximity to
one another in order to share in distribution infrastructure.” Why would Xcel be against co-location when it takes advantage of
shared infrastructure and drive down prices for customers? When it comes to community solar energy which Xcel doesn’t own,
control and sell to others then they are willing to forfeit those economies of
scale they say they value.

XCEL’s REAL MOTIVATION

Although articles in the mainstream media might not spell it
out, there is a rather obvious reason why Xcel is uncomfortable enough with
CSG’s. When anyone decides to subscribe to a Community Solar Garden, Xcel
essentially loses that former customer for the 25 year time period as far as
energy supply. A devotion to maintaining market share is the reason Xcel so
wants to instead build their own large-scale solar fields that mimic a central
station power plant. Xcel can get their customers to pay for it and they get to
keep them as full customers.

Xcel/ NSP also used to fight small-scale and locally owned wind
for much the same reasons. Xcel prefers renewable energy to be structured
in a way that allows them to buy on bids using customer ratepayer dollars so it
can be added to their base of assets. Investor Owned Utilities (IOUs) thrive on
this base of assets because they are guaranteed profits by the PUC about a 10%
rate of return. Xcel began 'rate basing' the wind farms, very parallel to what
they are trying to do with utility scale solar today. As a result, much of the
original locally owned wind operations have been driven into bankruptcy.

A SLOWER PACE FOR COMMUNITY SOLAR GARDENS

It must have sent a shock to Xcel when large customers like
Ecolab, Inc. and Macalester College announced plans to offset their entire
energy consumption through subsription to community solar gardens. About the same time Xcel Energy suspiciously made some quite significant changes to the language their community solar garden website. Their website in
February read:

“There is no limit to the number of solar gardens which can be
placed on a property, but no single garden can exceed the 1 megawatt PV system
cap. While there is no program restriction on multiple gardens in one area,
there could be technical limitations that could require expensive distribution
system upgrades.”

Then shortly after, they vastly simplified the corresponding language in the
latter version of the same website in order to make room for their pursuit of a setting 1 MW aggregate size limit:

“The maximum solar garden system size is 1MW AC. The
system size is based on the sum of the inverter(s) maximum AC output.”

Why this change in language? Xcel intended to have a more gradual phase-in of community
solar than the 420 megawatts in CSG applications they
received the first week of their program. What Xcel said in
the April 28 filing was “If all current gardens in the queue were developed,
the company would add nearly all of its planned distributed solar resources,
not over 15 years, but in a single year.”

Xcel basically wants to slow it down. They are fine with people
having community-owned solar power, but just not have so much of it that they
will no longer need Xcel. IOU’s in general fear a future where they're no
longer needed. Xcel would do well to embrace a future in which they claim less
than a monopoly on generation. Even with distributed generation, utilities like
Xcel still have a purpose in being the central entity primarily responsible for
transmission & distribution, reliability, grid management, etc.

THE WISCONSIN PROGRAM

Xcel Energy in Wisconsin shows what it is like when they
voluntarily choose to offer Community Solar, which is the first-ever community
solar to its customers in Wisconsin. But they plan to offer community solar on
a much smaller scale than the 80 megawatts they agreed to be willing to do in
Minnesota. Absent a state statute in Wisconsin, Xcel gets to do community solar
its way which is a maximum of3 megawatts of solar power through three or four arraysin their
Wisconsin Service territory. Here is another big difference on community solar
in the neighboring states. While Xcel projects that Wisconsin community solar
customers would receive credits of 6.9 cents or 7.4 cents per kilowatt hour,
Minnesota community solar participants are expected to receive 12-15 cents per
kilowatt hour. The same Wisconsin Public Service Commission (PSC) that approved
increased fixed charges to solar homeowners approved this community solar
proposal.http://www.midwestenergynews.com/2015/04/30/xcel-pursues-community-solar-in-wisconsin-but-on-small-scale/s

The first person who
spoke during the June 23rd daylong community solar hearing at the MN PUC was Andy Brown who was a lawyer representing Xcel.He
stated"The Company believes the program is seriously off-track". He said Xcel was talking
about having 15- 30 MW of CSG next year and then maybe 100 MW of CSG in 5 years
but they have received to date applications for 912 MW.

Browntold the PUCin reference to the 912 MW figure "You might find
that number to be staggering. It certainly is to the company."

However, the 912 MW figure should
be no cause for alarm, even by Xcel’s standards.Yes 912 MW
in applications is a huge, but almost none of those megawatts to anyone’s knowledge had been
approved yet. Seven months after
they first started taking applications for community solar,Xcel
is sitting on the huge stack ofCSG applications totaling almost a gigawatt. Developers intend all of these projects to be completed by the end of 2016 so
that developers can capture the federal investment tax credit before it expires.No
applications have made it through in 7 months! This looks like a sign of a delay tactic but there is more to the story at play.

Xcel has sent
a one-two punch of uncertainty to CSG developers by being slow to offer transparency about the capabilities of
its distribution system as well as injecting another cloud of uncertainty forcommunity solar developers by
filing these objections about the program itself. This double uncertainly led to a
gold rush mentality for developers to get their applications inbefore the rules might change. Xcel received 420 MW of CSG proposals the first week they started accepting applications in December of 2014. The day that Xcel made its regulatory filing back on April 28th, there were a total of 560 MW Xcel received for CSG project applications. Then that figure almost doubled in less than 2 months because of CSG developers regulatory uncertainly. Given this, they should have had no justification to complain about how
staggering the number of MW was they received in CSG applications.

In addition, so many of
the megawatts in these proposals won't be built because of limitations in the utility'sdistribution grid.There
isn’t even capacity for 500 MW of CSGin Xcel’s interconnection queue.The upgrades needed to the
distribution system could prohibit close to half of the proposed CSGs.Plus even if certain projects are
wholly feasible on the technical side, the developers may be unable to get
financing to build them.

An interesting part about the whole ordeal is that the CSG developers themselves are on the hook for paying for the
grid system upgrades. I heard there is an up-front cash deposit of about $100,000 per MW. Pay to play is required and that limits a lot of people. In that
case, developers are doing a generous deed for Xcel volunteering to invest in
the distribution system rather than as merely a nuisance to their market share. It is only fair to compensate CSG developers for displacing a utility's need for peaking capacity.

Solar developers that
have already invested a lot of time in Minnesota were inspired by their
interpretation of rules the PUC approved in 2014. As a result, they already have millions of
dollars committed to those projects.

LACK OF TRANSPARENCY

The flood of applications Xcel
has received is also a product of a lack of transparency on their part.Solar
developers tried to be as transparent with the utility as possible. Many CSG developers had no
other option to submit what they had because Xcel was not releasing some key
information about their grid. The developers did not know the best spots to have CSG’s in Xcel’s
distribution system due to this lack of info. Before June 4th, developers
were shooting in the dark about where their site will be because only the most rudimentary info about CSG was recently made available by Xcel. CSG developers had to put 12 K
or 100 K money down just to find that information out. The solar developers
were not trying to hoodwink anyone and tried to be transparent. If Xcel would
have released information about the state of theirs grid, we all could have gotten this
resolved long ago. This points to a devious strategy and unfair tactic to undermine the inputs for CSGs
then attack the outputs. Xcel giving limited insight into their distribution
system hurts market certainty. Xcel also injected tremendous amount of
uncertainty into the market by making these regulatory filings. Lots of hard work could
be lost if more uncertainty is injected.

For example developers should not have to start over and shift
their site 20 yards just because of a change in permitting that could have been
foreseen with transparent info.

CSG developers need sufficient timeframe and directives or they won’t
have any program at all. It is a vicious cycle that has started. Developers had
a gold rush incentive to apply before the rules changed and are faced with an
expiring federal tax credit. In turn, the process of application tracking is
delayed by the sheer number of applications Xcel has to process.

Hopefully with the partial settlement that the PUC approved, there will be some more
accountability for an application tracking process to move through in a timely
way.